Datasea Inc. (NASDAQ: DTSS) (“Datasea” or the “Company”), a technology company engaged in providing smart security solutions and developing education-related technologies in China, reported results for the fiscal third quarter and nine months ended March 31, 2020.

Third Quarter 2020 Financial and Recent Highlights:

  • Secured 33 purchase orders for Datasea’s customized hardware and proprietary software solutions that are being utilized in public spaces on campuses, shopping malls, scenic areas, residential areas, and factories, with cash inflow from customers in full amount.
  • Commenced a six-location pilot program with K-12 schools and public communities in Nanjing and Taiyuan, to provide infrared thermometers and related hardware & software solutions aimed at detecting outbreaks, and completed the installation of the Epidemic Prevention and Control Systems in two K-12 schools, as the first part of the Company’s six-location pilot program.
  • Signed 17 new agreements since April 1, 2020 with various K-12 schools to deploy intelligent campus security systems.
  • Signed 12 new agreements since April 1, 2020 to deploy intelligent public community security systems.

Management Commentary

“In the fiscal third quarter 2020 we continued to make significant progress on our mission of enhancing the safety of the communities where we inhabit and work,” said Ms. Zhixin Liu, Chairwoman and CEO of Datasea. “Our organization’s unwavering commitment to our mission was evidenced in the third quarter of 2020 in our ability to focus our efforts on development and launch our Epidemic Prevention and Control System (the “System”). This System enhances the efficiency of community managers and provides a safer and more transparent work environment. The 45 purchase orders for this System that we have received to date represent a solid effort in our commercialization efforts for this product, giving us confidence going forward. In the educational market, we managed to secure 17 new agreements with K-12 schools since April, which we believe reflects the growing need for our solutions. We intend to direct our proprietary technology, sales channels, and operational momentum to help us to capitalize on future opportunities.”

Fiscal Third Quarter 2020 Financial Results

The Company did not generate any revenue in the fiscal third quarter of 2020 or during the same period one year ago.

Selling expense was $33,000 as compared to $34,000 in the same period one year ago. The decrease was primarily driven by lower salary expenses, and partly offset by higher travel expenses in the period.

General and administrative expenses decreased to $428,000 from $511,000 in the same year-ago period. The decrease was primarily due to the Company’s ongoing cost and expense management initiatives.

Research and development expenses increased to $109,000 from $29,000 in the same period one year ago. The increase was primarily due to investment in additional research and development personnel in the period.

Net loss totaled $(557,000), or $(0.03) per diluted share, as compared to net loss of $(343,000), or $(0.03) per diluted share, in the same period one year ago.

Fiscal Nine Months 2020 Financial Results

The Company did not generate any revenue in the first nine months of 2020 or the comparable period last year.

Selling expense decreased to $143,000 from $183,000 in the same year-ago period. The decrease was primarily driven by lower salary expenses, and partly offset by higher travel expenses in the period.

General and administrative expense increased to $1.4 million from $1.0 million in the same year-ago period. The increase was primarily due to higher rent expenses and professional fees.

Research and development expenses increased to $230,000 from $133,000 in the same year-ago period. The increase was primarily due to investment in additional research and development personnel in the period.

Net loss totaled $(1.7) million, or $(0.08) per diluted share, compared to net loss of $(1.3) million or $(0.06) per diluted share, in the same year-ago period.

About Datasea Inc.

Datasea is a technology company in China engaged in providing smart security solutions and developing education-related technologies. Datasea leverages its proprietary technologies, intellectual property, innovative products and market intelligence to provide comprehensive and optimized security solutions and education-related technologies to its clients. Datasea has been certified as one of the Zhongguancun High Tech Enterprises in recognition of its achievement in high technology products. Datasea's security and technology engineers and experts create, design, build and run various security systems and education technologies tailored to its clients' needs. Through its professional team and strong expertise in the industry, Datasea offers its clients a broad portfolio of security solutions, along with strategic advice and ongoing management of their security infrastructure, and digital education tools or programs. For additional company information, please visit: www.shuhaixinxi.com.

Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "going forward," "outlook" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Datasea's control, which may cause Datasea's actual results, performance or achievements (including, without limitation, the performance and related results of operations arising from Datasea’s contracts and products addressed in this press release) to differ materially and in an adverse manner from anticipated results contained or implied in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in Datasea's filings with the U.S. Securities and Exchange Commission, which are available at www.sec.gov. Datasea does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under the law.

DATASEA INC.CONSOLIDATED BALANCE SHEETS

    March 31, 2020     June 30, 2019  
    (Unaudited)     (Audited)  
ASSETS            
             
CURRENT ASSETS            
Cash   $ 2,010,811     $ 6,072,637  
Restricted cash     600,000       600,000  
Inventory     272,749       73,294  
Value-added tax prepayment     70,534       -  
Prepaid expenses and other current assets     491,913       105,932  
                 
Total current assets     3,446,007       6,851,863  
                 
 NONCURRENT ASSETS                
Fixed assets, net     252,315       41,116  
Intangible assets, net     1,948,882       555,811  
Right-of-use assets, net     758,162       -  
                 
Total noncurrent assets     2,959,359       596,927  
                 
TOTAL ASSETS   $ 6,405,366     $ 7,448,790  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
CURRENT LIABILITIES                
Accounts payable   $ 46,768     $ 13,088  
Advances from customers     1,361,134       1,318,897  
Accrued expenses and other payables     178,779       264,684  
Loan payable to shareholder     -       86,733  
Operating lease liabilities     348,401       -  
                 
Total current liabilities     1,935,082       1,683,402  
                 
NONCURRENT LIABILITIES                
Operating lease liabilities     421,558       -  
                 
Total noncurrent assets     421,558       -  
                 
TOTAL LIABILITIES     2,356,640       1,683,402  
                 
STOCKHOLDERS’ EQUITY                
Common stock, $0.001 par value, 375,000,000 shares authorized, 20,943,846 shares issued and outstanding at March 31, 2020 and June 30, 2019     20,944       20,944  
Additional paid-in capital     11,104,666       11,104,666  
Accumulated comprehensive income     179,000       189,906  
Accumulated deficit     (7,255,884 )     (5,550,128 )
                 
TOTAL STOCKHOLDERS’ EQUITY     4,048,726       5,765,388  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 6,405,366     $ 7,448,790  

DATASEA INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(Unaudited)

    NINE MONTHS ENDED     THREE MONTHS ENDED  
    March 31, 2020     March 31, 2019     March 31, 2020     March 31, 2019  
                         
Revenues   $ -     $ -     $ -     $ -  
Cost of goods sold     -       -       -       -  
                                 
Gross profit     -       -       -       -  
                                 
Operating expenses                                
Selling     142,605       183,240       33,284       34,388  
General and administrative     1,373,837       1,013,136       428,227       510,983  
Research and development     229,511       133,103       109,146       29,218  
                                 
Total operating expenses     1,745,953       1,329,479       570,657       574,589  
                                 
Loss from operations     (1,745,953 )     (1,329,479 )     (570,657 )     (574,589 )
                                 
Non-operating income                                
Other (expense) income, net     (3,632 )     (2,571 )     2,784       894  
Interest income     43,828       47,114       10,134       32,696  
                                 
Total non-operating income, net     40,196       44,543       12,918       33,590  
                              -  
Loss before income tax     (1,705,757 )     (1,284,936 )     (557,739 )     (540,999 )
                                 
Income tax     -       -       -       -  
                                 
Net loss     (1,705,757 )     (1,284,936 )     (557,739 )     (540,999 )
                                 
Other comprehensive item                                
Foreign currency translation gain (loss)     (10,906 )     222,332       719       198,209  
                                 
Total comprehensive loss   $ (1,716,663 )   $ (1,062,604 )   $ (557,020 )   $ (342,790 )
                                 
Net loss per share                                
Basic and diluted   $ (0.08 )   $ (0.06 )   $ (0.03 )   $ (0.03 )
                                 
Weighted average shares outstanding                                
Basic and diluted     20,943,846       19,845,627       20,943,846       20,943,846  

DATASEA INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

    Nine Months Ended  
    March 31, 2020     March 31, 2019  
             
Cash flows from operating activities:            
Net loss   $ (1,705,757 )   $ (1,284,936 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     38,536       28,285  
Operating lease expense     113,211       -  
Changes in assets and liabilities:                
Inventory     (204,186 )     279  
Prepaid expenses and other current assets     (394,017 )     12,099  
Accounts payable     34,500       -  
Advance from customers     83,889       -  
Accrued expenses and other payables     (13,338 )     (44,790 )
Taxes payable     (105,098 )     -  
Payment on operating lease liabilities     (132,953 )     -  
                 
Net cash used in operating activities     (2,285,214 )     (1,289,063 )
                 
Cash flows from investing activities:                
Acquisition of fixed assets     (248,333 )     (64,531 )
Acquisition of intangible assets     (1,400,000 )     -  
                 
Net cash used in investing activities     (1,648,333 )     (64,531 )
                 
Cash flows from financing activities:                
Payment of loan payable - shareholder, net     (85,091 )     (15,392 )
Net proceeds from sale of common stock - offering     -       5,240,889  
Net proceeds from issuance of common stock     -       308,858  
                 
Net cash provided by (used in) financing activities     (85,091 )     5,534,355  
                 
Effect of exchange rate changes on cash     (43,189 )     129,722  
                 
Net (decrease) increase in cash and restricted cash     (4,061,826 )     4,310,483  
                 
Cash and restricted cash, beginning of period     6,672,637       1,031,486  
                 
Cash and restricted cash, end of period   $ 2,610,811     $ 5,341,969  
                 
Supplemental disclosures of cash flow information:                
Cash paid for interest   $ -     $ -  
Cash paid for income tax   $ -     $ -  
                 
Supplemental disclosures of non-cash investing and financing activities:                
Right-of-use assets obtained in exchange for new operating lease liabilities   $ 875,366     $ -  
Investor Relations Contact:

Gateway Investor Relations
Matt Glover
DTSS@gatewayir.com
949-574-3860
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